TAXES & CITY FINANCES
Business and Occupation Tax
B&O Tax Exemptions and Deductions
This section includes a number of common exemptions and deductions from the gross receipts Business and Occupation (B&O) tax. This section is not intended to be all inclusive. If you have questions, please contact the Lacey Finance Department at (360) 491-3212.
- Investments. B&O taxes shall not apply to amounts derived by persons, other than those engaging in banking, loan, security, or other financial businesses, from investments or the use of money as such, and also amounts derived as dividends by a parent from its subsidiary corporations.
- Employees. B&O taxes shall not apply to any person in respect to the person’s employment in the capacity as an employee or servant as distinguished from that of an independent contractor. For the purposes of this subsection, the definition of employee shall include those persons that are defined as such in the Internal Revenue Code, as hereafter amended.
- Sale of Real Estate. B&O taxes shall not apply to gross proceeds derived from the sale of real estate. This, however, shall not be construed to allow an exemption of amounts received as commissions from the sale of real estate, nor as fees, handling charges, discounts, interest or similar financial charges resulting from, or relating to, real estate transactions. B&O taxes shall also not apply to amounts received for the rental of real estate if the rental income is derived from a contract to rent for a continuous period of thirty days or longer.
- Mortgage brokers' third-party provider services trust accounts. B&O taxes shall not apply to amounts received from trust accounts to mortgage brokers for the payment of third-party costs if the accounts are operated in a manner consistent with the Revised Code of Washington 19.146.050 and any rules adopted by the director of financial institutions.
- Amounts derived from manufacturing, selling or distributing motor vehicle fuel. B&O taxes shall not apply to the manufacturing, selling, or distributing motor vehicle fuel, as the term "motor vehicle fuel" is defined in the Revised Code of Washington 82.36.010 and exempt under the Revised Code of Washington 82.36.440, provided that any fuel not subjected to the state fuel excise tax, or any other applicable deduction or exemption, will be taxable under B&O taxes.
- Casual and isolated sales. B&O taxes shall not apply to the gross proceeds derived from casual or isolated sales, unless said sale would rise to the minimum amount of gross income pursuant Section 3.02.050 of the Lacey Municipal Code.
- Accommodation sales. B&O taxes shall not apply to sales for resale by persons regularly engaged in the business of making retail sales of the type of property so sold to other persons similarly engaged in the business of selling such property, where:
- The amount paid by the buyer does not exceed the amount paid by the seller to the vendor in the acquisition of the article; and
- The sale is made as an accommodation to the buyer to enable the buyer to fill a bona fide existing order of a customer or is made within fourteen days to reimburse in kind a previous accommodation sale by the buyer to the seller.
- Taxes collected as trust funds. B&O taxes shall not apply to amounts collected by the taxpayer from third parties to satisfy third party obligations to pay taxes such as the retail sales tax, use tax, and admission tax.
- Receipts from tangible personal property delivered outside the state. In computing tax, there may be deducted from the measure of tax under retailing or wholesaling amounts derived from the sale of tangible personal property that is delivered by the seller to the buyer or the buyer’s representative at a location outside the state of Washington.
- Cash discount taken by purchaser. In computing tax, there may be deducted from the measure of tax the cash discount amounts actually taken by the purchaser.
- Credit losses of accrual basis taxpayers. In computing tax, there may be deducted from the measure of tax the amount of credit losses actually sustained by taxpayers whose regular books of account are kept upon an accrual basis.
- Amounts derived from manufacturing or selling at wholesale. In computing tax, there may be deducted amounts derived from manufacturing or selling at wholesale.
- Constitutional prohibitions. In computing tax, there may be deducted from the measure of the tax amounts derived from business which the city of Lacey is prohibited from taxing under the Constitution of the State of Washington or the Constitution of the United States.
- Amounts included in the gross receipts reported on the tax return derived from the sale of tangible personal property delivered to the buyer or the buyer’s representative outside the city but within the state of Washington may be deducted from the measure of tax under the retailing or wholesaling classification.
- In computing the tax, a professional employer organization may deduct from the calculation of gross income the gross income of the business derived from performing professional employer services that is equal to the portion of the fee charged to a client that represents the actual cost of wages and salaries, benefits, works’ compensation, payroll taxes, withholding, or other assessments paid to or on behalf of a covered employee by the professional employer organization under a professional employer agreement.